Fitch Ratings has affirmed the class A notes at 'A' and upgraded the class B (to 'BBB' from 'BB+'), class C (to 'BB' from 'B+') and class D (to 'B+' from 'B') notes for Virgin Australia Holdings Limited's (VAH, not rated publically) enhanced equipment notes (EEN) series 2013-1. Fitch's ratings cover approximately $595 million of outstanding senior and subordinated notes.
The upgrades to all of the subordinated tranches are driven by the general improvement of VAH's corporate credit profile in Fitch's view, while the upgrades of the B and C subordinated tranches are also driven by an increase in the recovery prospects due to rapid amortization of the notes and the corresponding decline in the transaction's loan-to-value (LTV).
Since Fitch's last review of VA 2013-1 in October 2014 there has been substantial amortization of outstanding debt; debt was paid down $136.8 million. In addition, the initial pool featured two 737-700s which have subsequently been removed from the pool as the equipment notes and the corresponding EEN debt were repaid in full over the past two years.
Key ratings considerations include the quality of the aircraft collateral, significant overcollateralization, the Australian and New Zealand insolvency regimes coupled with the transaction's underlying structure, the liquidity facilities, VAH's credit quality, and various additional structural elements.